Neutral Citation: 2008 ONFSCDRS 58

FSCO A06-000955

BETWEEN:

GLORIA HUTCHINSON Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY Insurer

DECISION ON A MOTION

Before: Arbitrator John Wilson Heard: By written submissions Appearances: David Hayward for Ms. Hutchinson Rita Urbonavicius for Dominion of Canada General Insurance Company

Issues:

The Applicant, Gloria Hutchinson, was injured in a motor vehicle accident on June 26, 1998. She applied for and received statutory accident benefits from Dominion of Canada General Insurance Company (“Dominion”), payable under the Schedule.¹

The parties were unable to resolve their disputes through mediation, and Ms. Hutchinson applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Ms. Hutchinson precluded from proceeding to arbitration because of a failure to provide notice of her caregiving claim, and her claim for the provision of a mattress within the period prescribed by section 32(1) of the Schedule?

Result:

Ms. Hutchinson is not precluded from proceeding to arbitration on the above issues.

This matter comes before me by way of motion brought by Dominion. In general, there is an evidentiary onus on the moving party in a motion to set out the necessary supporting evidence to justify the outcome requested. In addition, in insurance matters, there is often a further burden on someone relying on an exception to coverage. In Bond Air Services Ltd. v. Hill², Lord Goddard, C.J., observed: “There is no doubt that the onus with regard to an exception is always on the insurers.”

In this matter, but for the allegation of the Insurer that a time limit was missed that was not redeemed by any reasonable excuse, there would be no question that the issues of caregiver and the provision of a mattress would be squarely before the arbitrator. On such an analysis it would be incumbent upon Dominion to provide convincing evidence that the exclusions relied upon prevail.

Since the accident benefit provisions form part of an insurance contract, there are also approaches to interpretation that are specific to this field.

In interpreting insurance contracts, certain basic principles must be applied. Insuring agreements should be construed broadly, and exclusion clauses should be construed narrowly. Where a policy admits of two interpretations, the interpretation most favourable to the insured should be adopted. The policy should be construed, at least where it is ambiguous, to give effect to the reasonable expectations of the parties. And an interpretation which would render the protection provided by an insuring agreement illusory or nugatory should be avoided.³

The issues raised by Dominion in this matter touch principally on the caregiver claim brought forward by Ms. Hutchinson. Dominion has taken the position that “the applicant has not provided any information to substantiate the need for a caregiver benefit.” The Insurer also relies on section 38 of the Schedule and sections 31 and 32 of the Schedule.

Secondarily, the Insurer takes issue with a “one off” claim for a specialized mattress claimed as a medical benefit.

Dominion’s submissions are that as a result of the alleged non-compliance with the provisions of the Schedule, “(I)t is therefore the insurer’s position that it is unable to respond to the applicant’s claims in the circumstances.” Presumably this position arises from section 33 of the Schedule which provides for a duty on an insured to provide certain information “within 10 business days after receiving a request from the insurer.”

Ms. Hutchinson argues that Dominion did respond to the claims for caregiver expenses, and indeed, initially paid benefits. Only on November 30, 2005 was a refusal to pay made with respect to caregiver benefits on the basis of the Insurer’s opinion that Ms. Hutchinson had not suffered a complete inability to carry on a normal life.

Ms. Hutchinson also points out the initial failure of Dominion to advise that potentially more than one weekly benefit was available to her and to provide an OCF-10 election form on a timely basis.

By raising the statutory defence of a failure to adhere to an appropriate time-limit, the Insurer opened itself to a consideration of its own timing and conduct in raising such technical defences.

According to Ms. Hutchinson, they were not raised at the time the application was made, they were not raised at the time certain of the caregiver expenses were paid, and they were not raised at the time that an ongoing benefit was refused. Rather, the refusal of caregiver benefits was based on the insurer’s opinion that Ms. Hutchinson did not meet the prerequisites for further payments of a caregiver benefit.

It is my understanding that the Insurer’s technical objections to the caregiving and medical benefit (mattress) claims were first outlined as part of the dispute resolution process. It goes without saying that learning some eight years post-accident that the circumstances surrounding the timing of the initiation of the claim are at issue could entail some challenges in attempting to retrieve information relative to the issue.

While, pursuant to section 131(1) of the Insurance Act, there can be no waiver of a term or condition of a policy without the written approval of an authorized representative of an insurer, it has been long accepted that the actions and representations made by an insurer can have a direct impact on its right to assert a particular defence.

In Hansa v. York Fire and Casualty Co., ⁴Weiler J. noted that the happening of an event, which implicitly acknowledges an existing right, even in the face of other information suggesting that a lapse of those rights had occurred, “is a conclusive election not to take advantage of the clause.”

As well, the doctrine of laches may be used to bar reliance on circumstances that have long lain in the shadows. “Laches” have been defined as - unjustifiable, inexcusable, or unreasonable delay in performing a legal duty, asserting a right, or claiming a privilege.⁵

Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy. ⁶

According to the Supreme Court, “(U)ltimately, laches must be resolved as a matter of justice between the parties, as with the case with any equitable doctrine.”⁷

Whether identified specifically as “laches” or any other technical title, what is at issue in the insurer’s conduct is its apparent acquiescence in not insisting on its technical rights in the provision of timely notice, or in the provision of a reasonable excuse for a default in notice.

Acquiesence is a fluid term, susceptible to various meanings depending upon the context in which it is used. Meagher, Gummow and Lehane, supra, at pp. 765-66,

identify three different senses, the first being a synonym for estoppel, wherein the plaintiff stands by and watches the deprivation of her rights and yet does nothing. This has been referred to as the primary meaning of acquiescence. Its secondary sense is as an element of laches -- after the deprivation of her rights and in the full knowledge of their existence, the plaintiff delays. This leads to an inference that her rights have been waived. This, of course, is the meaning of acquiescence relevant to this appeal. The final usage is a confusing one, as it is sometimes associated with the second branch of the laches rule in the context of an alteration of the defendant’s position in reliance on the plaintiff’s inaction.⁸

There is no evidentiary basis in this matter for a conclusion that the Insurer communicated its concerns about time-limits, or about the provision of a reasonable excuse at any early date, nor that it renewed its concerns at any time before these issues came into the arbitration process. Clearly, any allegation of delay in notice and lack of a reasonable excuse was not addressed promptly. Indeed, they were never clearly addressed at all in any of the explanations of benefits in evidence before me.

The actions and defaults alluded to by the Insurer do not constitute new information. The underlying facts were known and discoverable throughout the claims process. Consequently, I find that the Insurer’s delay in raising the technical objection is fatal to that aspect of its defence.

In this context it should be remembered that the provisions of section 32(3.1) are there as part of the consumer protection mandate of the Insurance Act. If an insurer is to reject an application as missing critical information, then the deficiency must be addressed promptly so that an insured can either rectify the problem directly or abandon his or her claim, avoiding further unnecessary costs.

Rather than constituting a barrier to access, the provisions in section 32(3) must be seen as an incentive for the applicant to provide necessary information on the accident and claims to an insurer on a timely basis and interpreted in that context.

Ms. Hutchinson has also raised the issue of the Insurer’s failure to deliver an OCF-10 (Election Form) until May 20, 2005. To the extent that Dominion has brought into question Ms. Hutchinson’s conduct (failure to provide notice within the 30 days of circumstances giving rise to entitlement) it is important to note the effect that has been given to the maxim ex dolo malo non oritur actio in Ontario.

The maxim as originally interpreted by Lord Mansfield was understood to mean:

The principle of public policy is this: Ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act. If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says that he has no right to be assisted. It is on that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So, if the plaintiff and defendant were to change sides and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis.⁹

While the maxim has often been seen to deal only with illegal action, Ontario courts have also seized on the aspect of reliance upon one’s own transgression of a positive law. Rose C.J.H.C. gave the following interpretation:

It was a principle, the Lord Chancellor said, of the law that no one could in such case take advantage of the existence of a state of things which he himself produced; that is to say, if the builder by reason of his own lack of diligence became unable to complete the ship within the stipulated time he could not get out of his obligation to complete by saying that the contract provided that in the case of inability to complete the contract should be null and void.¹⁰

It would be wrong to allow an insurer to rely on a limitations defence if its own default in providing for an election of benefits was a factor in any delay.

Sections 36 (2) and (3) of the Schedule indicate that the provision of a notification by an insurer to an insured is mandatory when “a person’s application indicates that he or she may qualify for more than one of the benefits mentioned….”

The Application for Accident Benefits date-stamped July 30, 1998 (but dated July 20 1989) clearly lists “caregiver” and lists the names and ages of the children being cared for. The disability certificate, dated July 24, 1998, clearly indicates “caregiver Benefits” but has “yes” written next to “Non-earner benefits” in part 4 of the form.

Given the low threshold set by the words “may qualify” in section 36(2), I have no hesitation in finding that within the 30 days then allowed for notice of intent to make an application for accident benefits, Dominion should have known of the possibility of an election, and was under an obligation to provide a notice of election to Ms. Hutchinson.

The fallout of the Smith v. Co-operators¹¹ decision has included a general understanding of the positive obligation on the part of an insurer to provide any required documentation or to undertake any specified act before a limitation can be expected to arise.

As Arbitrator Killoran has observed:

The Supreme Court of Canada in the case of Smith v. Co-Operators indicated that the dispute resolution process is consumer protection legislation and must be strictly followed in these words: “There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance.” By not signing the Settlement Disclosure Notice, Mr. Jetty submits that ING did not provide a proper Settlement Disclosure Notice. This is not just a technical or formal defect. The requirement of the insurer’s representative’s signature is to assign responsibility for the statements contained therein and to give credibility to the settlement process. There is no exception for insureds who are represented by counsel as the provision is clearly mandated.¹²

Likewise, where an insurer is mandated to provide an election of benefit form, the failure is neither minimal, nor excusable. It is not a situation for the application of de minimis non curat lex. Consequently, any time limit relating to the application for caregiver expenses would not run until the Insurer’s obligation to advise of the election and provide the election forms was satisfied.

With regard to the Insurer’s assertion that “it is unable to respond to the applicant’s claims in the circumstances”, this statement is belied by Dominion’s own actions in the adjustment of Ms. Hutchinson’s claim. On the evidence before me, it is clear that Dominion was able to make a determination with regard to caregiving and with regard to the need for a mattress.¹³ If there were other reservations than those expressed by Dominion’s adjusters at the time, there is no evidence that they were ever communicated to Ms. Hutchinson either directly or indirectly, prior to this arbitration.

Dominion’s bald assertion that they were unable to respond to the claims, remains, in the absence of concrete evidence from the claims handlers or the supporting documents, just that; an assertion.

With regard to any potential section 33 argument raised by the Insurer, I do not accept that there is any evidence that Ms. Hutchinson has failed to provide, when specifically requested, any information reasonably required to assist the insurer in determining her entitlement to the benefits claimed.

Section 33 is not a sort of parlour game where an insured is supposed to guess as to the specific information needed by an insurer to process the claim. An insurer must make the request, with sufficient specificity that its insured can promptly provide the necessary information.

In the absence of evidence of such specific requests, and evidence demonstrating that the requests were necessary for a determination, Dominion cannot avail itself of section 33 of the Schedule as a bar to arbitration.

Whether it is characterized as laches, acquiescence, or the operation of the fairness principle, it is the insurer’s unconscionable delay in pursuing its potential defence that speaks most clearly in support of barring those technical defences.

In summary, Ms. Hutchinson would be seriously prejudiced if the Insurer was permitted to raise these statutory defences to her claims at this relatively late date.

No doubt the Insurer will suffer some prejudice as well if it may not avail itself of these defences, however it may still continue to raise the substantive defences that it first raised in its notice of termination for the caregiver benefit and its refusal of the mattress.

In a consumer protection scheme such as the accident benefit system, it is perhaps well to remember the need to wherever possible decide entitlement on substantive rather than technical grounds. As was observed in another context:

The court is always reluctant to dismiss a potentially meritorious claim on grounds that do not address its merits. Unless the defendant can demonstrate prejudice in the sense that to grant the plaintiff the indulgence he or she seeks will prejudice the defendant’s ability to defend the claim, the indulgence will usually be granted on appropriate terms.¹⁴

For the foregoing reasons, I find that Ms. Hutchinson is not barred from proceeding to arbitration on the issues of caregiving and the provision of a therapeutic mattress as a medical benefit.

EXPENSES:

If the parties are unable to agree on expenses within the next 14 days, I will accept brief written submissions on that issue.

April 7, 2008

John Wilson Arbitrator

Financial Services Commission of Ontario